Headed for the cliff? University of Utah maintenance backlog tops $400 million

SALT LAKE CITY — The state of Utah owns and operates thousands of buildings, the majority of which are located on or are affiliated with the campuses of Utah's institutions of higher education.

The buildings are costly to construct and make headlines when new brick and mortar projects are announced. But the costs of maintaining the buildings has become a growing concern, a backlog that now tops $400 million alone at the University of Utah and increases each year, said Cory Higgins, executive director of facility and construction operations at the U.

"We’re not to this situation yet, but you can get to a position where all of your funding is just spent fixing things that are already broken," Higgins said. "It’s always more expensive to fix it after it breaks than it is to prevent it from being broken. That’s the cliff that we are all trying to avoid."

Sen. Wayne Harper, R-Taylorsville, co-chairman of the Infrastructure and General Government committee, said the U. infrastructure project is an example of where neglected maintenance "came back to bite us."

He said statewide there are a number of buildings showing the impact of deferred capital improvement projects, not due to negligence by administrators but because there haven't been sufficient funds to keep up with building needs.

He gave the examples of the science building at Weber State University and the music building at Utah State University Eastern, which have both been approved for replacement by the Legislature. The buildings were well-built for their time, Harper said, but had become outdated.

"We need to go through and not just build and not worry about it," Harper said. "We need to build and have a plan for maintenance because, if we don’t, sometimes we’re worse off than had we not built it in the first place."

Higgins said neglected maintenance has the potential to reach a point where campus buildings lose functionality due to safety risks or failing equipment. The state may not be at the edge of a cliff, he said, but it is on a downhill slope that becomes steeper the longer it is ignored.

"I wouldn’t call it a crisis yet, but a lot of people are raising the alarm that we can’t continue to underfund these higher ed assets and expect to continue to compete in a worldwide market in education," he said.

Getting money

Higgins said the state has set a standard of allocating 1.1 percent of an asset's value each year for capital improvement. In the case of the University of Utah, that translates to roughly $20 million each year for improvement projects.

That figure is based on the combined value of all university buildings and increases proportionally with new construction, Higgins said, but does not currently account for green space, parking lots or roads and, until recently, did not include the electricity and water distribution systems that make up a campus' infrastructure.

Because infrastructure was not previously included in a campus' value, major replacements — like the roughly $100 million project the University of Utah is currently involved in — were not budgeted and came at the expense of other capital improvement needs. That put further strains on the resources available for routine and deferred maintenance, which were doubly impacted by the recession.

"It’s going slower than it needed to because the funding is coming slower than we would have hoped," Higgins said of the water and electricity upgrade. "It will be slowing down or impacting or increasing our (maintenance) backlog."

Deferred maintenance is not an issue unique to the U., school campuses or even the state of Utah. And Higgins credited lawmakers with being proactive by establishing the 1.1 percent standard, effectively ensuring that some funds will be allocated for capital improvement each year.

"The fact that Utah by statute has set that as an expectation is really a good practice," Higgins said. "In many regards we’re ahead of it."

Few entities in the private sector, by comparison, manage a comparable number of physical assets to those of a state. Intermountain Healthcare operates 20 hospitals in Utah, spokesman Daron Cowley said, and maintenance decisions are made on a site-specfic basis as opposed to a uniform standard.

"Some hospitals are very small hospitals in a community like Delta or Fillmore and some are very large medical centers," he said. "It just depends on the community."

Josh Haines, director of the Division of Facilities and Construction Management, said the 1.1 percent standard, when fully funded, is sufficient to meet the state's facility needs.

In total, the Division of Facilities and Construction Management oversees more than 3,000 buildings statewide — the number approaches 6,000 when smaller structures like work sheds are included — with a total value of $10.1 billion that are used by 29 different public agencies, according to Haines.

He said some capital projects were not approved during the recession, adding to or resulting in a backlog of deferred maintenance. State leaders focused on assets with the greatest needs to avoid disrupting services.

"Overall, I would say that Utah is probably in the top 10 (nationally) on a statewide level," Haines said of the state's facility management.

Haines also said campus infrastructure has been added to the evaluation of statewide assets, part of a solution to help avoid future situations like the one at the U., where one large-scale project threatened to consume the lion's share of capital funding for the state.

For context, Haines said that last year his department received 546 requests for improvement projects statewide, totaling $196 million. The state was able to fund 322 of those requests at a cost of $100 million, which is roughly equal to the cost of the infrastructure upgrade at the University of Utah.

"The U. really struggled to get the money they needed, but I think we finally got them through," he said. "They needed $100 million. That’s a full year’s worth of money that would have been tied up with the U."

Master plan

Haines said officials are working on a new master plan for state facilities and are in the process of evaluating the value of roads, parking and infrastructure for future calculations of funding allocations.

When those values are determined, Haines said, they will be included in the calculation of a facility's maintenance needs, similar to the 1.1 percent standard which now reflects electricity and water system on campus.

Harper said that in the past there was no standard for maintenance allocations, with state agencies instead bidding for whatever funding lawmakers appropriated that year.

He said the 1.1 percent standard places the state on better footing, but he and his committee co-chairman, Huntsville Republican Rep. Gage Froerer, intend to work with the State Building Board and the facilities division over the coming months to determine whether the funding benchmark should be increased.

"In reality, that 1.1 percent is not taking care of all the needs that we have. It’s taking care of the pressing needs but not all the needs to maintain the buildings for their 50-plus-year life cycle," Harper said.

Why keep building?

A maintenance backlog in the hundreds of millions of dollars could lead some to question why Utah's colleges and universities — or other state agencies — continue to construct new buildings.

But Higgins said construction stems from different funding sources than maintenance and often incorporates private donations, allowing the state to increase capacity, research and services without relying fully on taxpayer dollars.

"Those are gifts that mean we can grow and provide expansion and capacity to the state without the state dollars having to do it because a donor will do that," he said.

New buildings also add to the asset value of a campus, Higgins said, meaning that while the list of needed maintenance increases, so does the 1.1 percent funding allocation provided by the state.

Over the decades-long life of a building, the cumulative cost of maintenance is significant, Higgins said. But the state also gets the benefit of using that building each year.

"It think we’re doing all we can," he said. "Sure we’d love to do more, but it’s a matter of resources. I don’t think it’s a matter of shifting our priorities, it’s more of a matter of speaking to the priorities that we’ve set and hoping the state will treat us as good as they can when it comes to the limited funding they have to allocate around."

While the Infrastructure and General Government Committee is the primary body dealing with capital improvement funding, Sen. Stephen Urquhart, R-St. George, chairman of the Higher Education Appropriations Committee, said there have been discussions about his committee taking a more active role in addressing campus maintenance issues.

Urquhart said that he sees the infrastructure committee as dealing primarily with the construction of new buildings. But the primary focus of the Higher Education Appropriations Committee deals with day-to-day campus operations, he said, which could include maintenance.

"I think that is something that will be resolved over the interim," he said.

Urquhart said he has spoken with the various college and university presidents, and, with the exception of the University of Utah, the backlog of deferred maintenance has not reached a point of concern.

He said the U. found itself in a difficult situation with its aging water and electricity infrastructure, but school officials and lawmakers have worked together to chart a pathway forward.

During the 2013 legislative session, lawmakers approved a separate appropriation to assist in the infrastructure upgrade and Higgins said the revenue-generating auxiliary departments at the university will also absorb some of the costs of construction.

"My general observation is that the buildings are maintained well," Urquhart said. "I think that we have been very fortunate to have tremendous presidents that have managed the institutions extremely well."